Study: Retailers transform distribution, expand online, turning to the cloud to revolutionize customer experience
Part of the retail digital evolution includes a massive transformation of distribution centers.
As retailers race to deliver more unique and personalized customer experiences, the use of cloud, Internet of Things (IoT) and Big Data will accelerate in stores, online channels and distribution centers. However, one quarter of retailers still lag in the process of adopting new technologies and integrating them across operations to present a more integrated customer experience, according to a new report from Vertiv, Columbus, Ohio.
For the report, participants included executives from 50 large retailers, with a combined annual revenue of $953 billion in 2017. The study, “Into Uncharted Territory: Retail Transformation and its Impact on Digital Infrastructure”, co-sponsored by Vertiv and DatacenterDynamics, UK, revealed a heightened focus on online retail, as businesses transform their digital resources and capabilities to address changes in customer behavior. Over the next two years, the amount of data center space dedicated to online retail – both on-premise and co-location – is expected to increase by 20%, while cloud hosting would increase by 33% to support store applications.
Part of the retail digital evolution includes a massive transformation of distribution centers. The research suggests the number of distribution centers and warehouses will increase by about 26% over the next two years, as retail companies increasingly realign operations to meet consumer demand for online purchasing. The amount of data center space dedicated to distribution/logistics is expected to increase by 10% and the use of cloud hosting to support distribution will increase by 87%.
“It's no secret that online retail is driving significant IT investment for retailers. However, as this study makes clear, digital transformation in the retail space is about more than e-commerce,” says Lucas Beran, analyst, data center infrastructure at IHS Markit, UK. "Today’s retailers are striving to improve the IT systems in their stores and distribution centers, as they pursue impactful customer experiences across all interactions with their brand. More business-critical online, distribution and in-store environments require new approaches to physical infrastructure to increase IT reliability, speed time to market, hold down costs and reduce management complexity.”
The survey confirms that more computing power is being moved into stores to support edge computing-types of applications providing greater customer immediacy and influencing them at the point of use.
“Retailers are going to move more IT footprint into the stores, to communicate with customers and to influence them closer to the point of decision,” says Martin Olsen, vice president, global edge and integrated solutions at Vertiv. “Our forecast for the next couple of years shows about $2 going into stores and distribution for every dollar spent in the core data center. And, much of that data center investment is being made to support online and stores.”